December 2, 2020

FDI Will Remain Low As Long As Pakistan Stays In The FATF Grey List: IMF

In a briefing to the senior journalists in the National Press Club Islamabad on Monday, the country head for IMF in Pakistan Teresa Daban Sanchez said that there are five major threats to the IMF $6bn bailout package, namely:

1-     Debt Sustainability.

2-     Vested interests in Institutions.

3-     The ruling party not having the majority in the Upper House of Parliament.

4-     Large short-term debt.

5-     Pakistan staying in the FATF grey list.

She added that IMF had no problem dealing with the countries in the grey or blacklist of the FATF but being on this list discourages foreign investors and slows down the growth of the country. She urged the government to look into the matters of terror financing and money laundering and comply with the FATF to the fullest in order to get out of the grey list.

Commenting on the loans taken for the CPEC projects, she said that Pakistan has shared all the details of the CPEC loans with the IMF, as the loans are mostly for the private sector. She further added that the amount borrowed for CPEC is manageable but the total rising debt of Pakistan is not sustainable and Pakistan needs to focus on debt management.

She said that inflation may continue to rise in a coming couple of years amid slow economic growth, but the IMF program aims to develop the economy so the inflation rate will start to decrease eventually.

When asked about the huge military spending, Sanchez said that IMF does not intervene in the micromanagement of the funds and the government has promised the IMF to increase spending on the poor segment of the population.

Commenting on Pakistan’s growth model, Sanchez said that Pakistan is following the consumption-based growth model without a particular investment to GDP ratio, which is not sustainable. She further added that, when the country’s fiscal and current account deficits were sharply increasing, the government was showing an overvalued currency, which forced the State bank to invest heavily to keep that artificial rate at a particular level, costing the country billions.

She added that the IMF had put forward 10 goals for Pakistan to achieve, namely:

1-     Achieving debt sustainability

2-     Effective tax collection through improved FBR department

3-     Independent Central Bank

4-     Market determined Exchange Rate Regime

5-     Moderate Inflation

6-     Sustainable and inclusive growth

7-     Power sector efficiency

8-     New public finance management regime

9-     Management of SOEs (state-owned enterprises)

10-  Getting out of the grey list of the FATF

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